Forex Trading Glossary

Assessment of consumer sentiment toward the economy based on telephone interviews of several hundred adults. The survey queries people on their personal financial situation and current willingness to spend.

Financial relationship between two parties involving a transfer of funds, and an agreement to hold them. An Account is also summary of all financial transactions between those parties, the record tracks income, expenses, adjustment, credits and debits over a period of time.

An individual who participates in a retirement plan sponsored either by his/her employer or, if self-employed, by himself or herself. A person would be considered an active participant if his/her account balance in the retirement plan has received any contributions at all in a given year.

The lowest price that any investor or dealer has declared that he/she will sell a given security or commodity for. For over-the-counter stocks, the ask is the best quoted price at which a Market Maker is willing to sell a stock.

An arbitrage strategy usually consisting of the purchase of a particular security and the sale of a similar security (often the purchase of a security and the sale of a corresponding futures contract).

A prolonged period in which investment prices fall, accompanied by widespread pessimism. If the period of falling stock prices is short and immediately follows a period of rising stock prices, it is instead called a correction. Bear markets usually occur when the economy is in a recession and unemployment is high, or when inflation is rising quickly.

The Bid-Ask Spread, also known as the Bid-Offer Spread, is the quote of the price at which participants in a market are willing to buy or sell a good or security. Specifically, the bid price is the price at which a party is willing to purchase, while the ask (or offer) price is the price at which the same person or another party is willing to sell the same good or security.

A futures contract expires during this month. Delivery may also take place in this month, dependent upon the terms of the contract. This month is sometimes referred to as the contract month or the delivery month.

The Fibonacci sequence, named for its discoverer Leonardo Fibonacci, forms the basis for Elliott Wave theory used in trading financial markets. Out of Elliott Wave theory comes Fibonacci retracements and Fibonacci arcs discussed below. The Fibonacci sequence is 1,1,2,3,5,8,13,21,,34,55,89... to infinity. The sum of two consecutive numbers equals the next number. The ratio of any number to its next highest number approaches .618. The ratio of alternating numbers approaches .382. Also, 1 - .618 = .382. The midpoint of .382 and .618 is .50. This is why .382, .50, and .618 are used.

FX and Forex refer to Foreign Exchange, the exchange of one currency for another. Foreign Exchange is traded over the counter on an inter-bank system, a network of several thousand banks, although most trading is done by a few hundred such institutions.

A cash market transaction in which a seller agrees to deliver a specific cash commodity to a buyer at some point in the future. In contrast to futures contracts, forward contracts are privately negotiated and are not standardized.

A transaction consisting of a purchase or sale (often of foreign currency) with settlement to occur at a specified future date. Such a transaction will state the specific amount of the asset to be delivered at the specific time, as well as the unit price at which it will be delivered.

For a currency trader, fundamental analysis focuses on key underlying economic and political factors to determine the direction of a currency's value. There are a number of fundamental indicators traders may follow that reflect how an economy is changing and gleam insight into Forex market prices to come.

A standardized, transferable, exchange-traded contract that requires delivery of a commodity, bond, currency, or stock index, at a specified price, on a specified future date. In contrast to options, futures convey an obligation to buy.

Acronym for Gross National Product, which refers to the total value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those located abroad), minus income of non-residents located in that country.

A technical analysis term referring to a chart formation in which a price exhibits three successive rallies, the second one being the highest. The name derives from the fact that on a chart the first and third rallies look like shoulders and the second looks like a head.

The IMF, or International Monetary Fund, was established after World War II in December 1946. Its goals included promoting free trade, stabilizing exchange rates, and overseeing international monetary policy.

A theoretical value designed to represent the volatility of the underlying instrument as determined by the price of the option. The factors that affect implied volatility are the exercise price, the rate of return, maturity date and the price of the option.

A call option is in-the-money if the price of the underlying instrument is higher than the exercise/strike price. A put option is in-the-money if the price of the underlying instrument is below the exercise/strike price. Such options have intrinsic value.

A monthly measure of the change in purchases by corporate executives. One hundred and seventy-five managers distributed among different regions and sectors are asked: "Are your purchases higher, the same, or lower than the previous month" A headline value above 50 indicates an increase in purchases from the previous month and a value below 50 indicates a decrease.

A monthly measure of the change in purchases by corporate executives. One hundred and seventy-five managers distributed among different regions and sectors are asked: "Are your purchases higher, the same, or lower than the previous month" A headline value above 50 indicates an increase in purchases from the previous month and a value below 50 indicates a decrease.

M1 is the narrowest definition of the money supply and includes all coins and currency held by the public, plus travelers checks, checking account balances, and other checkable deposits consisting of negotiable order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, credit union share draft accounts, and demand deposits at thrift institutions.

The M2 measure of the U.S. money supply consists of M1, plus certain overnight repurchase agreements and certain overnight Eurodollars, savings deposits (including money market deposit accounts), time deposits in amounts of less than $100,000 and balances in money market mutual funds (other than those restricted to institutional investors).

M3 measure of the U.S. money supply consists of M2, plus large-denomination time deposits of $100,000 or more at all depository institutions, term repurchase agreements in amounts of $100,000 or more issued by all depository institutions, certain term Eurodollars (overnight and term) held by U.S. residents at foreign branches of U.S. banks worldwide and at all banking offices in the United Kingdom and Canada, and balances in money market mutual funds restricted to institutional investors (money funds with minimum initial investments of $50,000 or more).

Maintenance, also referred to as "minimum maintenance" or "maintenance requirement", refers to the absolute minimum amount of equity that an investor must maintain in their margin account at all times.

The right, but not the obligation, to buy (call) or sell (put) a specific amount of a given stock, commodity, currency, index or debt at a specified price (the strike price) during a specified period of time.

List of employees that a company is paying. The non-farm payrolls report is one of the key indicators of the labor market in the US. The report tends to include information on salaries, wages, bonuses and net pay after deductions.

Survey conducted by the Philadelphia Fed questioning manufacturers in the Third Federal Reserve District on general business conditions. Conducted since 1968, the "Philly Fed" survey is an established report, valued for its timeliness, scope of coverage and tendency to forecast developments in the market moving ISM Manufacturing figure.

The amount in assets kept in case of urgent need for liquidity. For central banks, reserves are the total amount in assets held by the bank in order to guarantee the authority's solvency and ability to conduct open market operations.

Standard & Poor's 500. A basket of 500 stocks that are considered to be widely held. The S&P 500 index is weighted by market value, and its performance is thought to be representative of the stock market as a whole.

Special Drawing Right. An artificial currency unit based upon several national currencies. The Special Drawing Right serves as the official monetary unit of several international organizations including the International Monetary Fund, and acts as a supplemental reserve for national banking systems.

An exchange of different streams of payments over a given period of time, in response to prior specified terms. The most common swap is an interest rate swap. In such a swap, one party agrees to pay a fixed interest rate to the other company in exchange for receiving its adjustable rate.

A short-term obligated investment that is backed by the U.S. government. These bills have maturities of a month (four weeks), three months (13 weeks) or six months (26 weeks). This bill is often called a treasury bill.

A country's trade balance reflects the difference between exports and imports of goods and services. The trade balance is one of the biggest components of the Balance of Payment, giving valuable insight into pressures on country's currency.

For exchange contracts it is the day on which the two contracting parties exchange the currencies which are being bought or sold. For a spot transaction it is two business banking days forward in the country of the bank providing quotations which determine the spot value date. The only exception to this general rule is the spot day in the quoting centre coinciding with a banking holiday in the country(ies) of the foreign currency(ies). The value date then moves forward a day

The name denoted for a narrow street in lower Manhattan , New York City, and considered to be the historical heart of the Financial District. It was the first permanent home of the New York Stock Exchange

A German Firm, the Center for European Economic Research (ZEW), queries financial experts throughout Europe every month in order to make a medium-term forecast about Germany 's economic situation

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Risk Warning :

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange, you should carefully consider your investment objectives, level of experience, and risk appetite. There is a possibility that you may sustain a loss of some or all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.